Trading can be a really overwhelming arena. There are so many things happening at all times. Market trends change, traders change strategies, currencies prices fall or rise, and so on.
Unless you keep track of everything that happens as you trade, it’s nearly impossible to hold yourself accountable for both your wins and losses. Moreover, it’s also challenging to learn and improve your trading skills.
This is where keeping a trading journal shines.
A trading journal is every trader’s essential tool to track progress. It includes details about your trades, notes on why you didn’t enter a trade, what you did, and what results you’ve obtained. In the long run, having all those details written down somewhere allows you to evaluate yourself objectively and learn from your mistakes and successes.
Let’s see the benefits of keeping a trading journal and tips on how to do it correctly!
Why keep a trading journal?
First things first, let’s emphasize the idea that keeping a trading journal is extremely useful for analyzing your trading decisions and improving them. A trading journal can do so many great things for you, from helping you understand yourself as a trader to learning the market better.
Here are a few benefits you’ll get by journaling your trades.
Maintaining a journal will help you face truths about your trading strategies that you don’t really notice as you trade. It enables you to see what you’re doing right and what you are doing wrong, allowing you to get a clear idea of where you could improve and become more disciplined.
Think about it: it’s clear that you won’t keep on trading without respecting the rules once you become aware of the fact that this is the reason for your losses.
Avoid emotional trading
It would be great if you could trade without feeling any sort of emotion, positive or negative.
Unfortunately, this isn’t possible.
Many traders struggle with emotional trading, allowing themselves to make crucial decisions when they aren’t in the best emotional state. Oftentimes, emotional trading leads to poor choices.
Think about it: after a win, the excitement can make you more willing to enter a risky trade without assessing the risks correctly (because you are overconfident). Or, after a loss, the stress and anger may make you more prone to make poor trading decisions as you try to get back some of the money you’ve lost. In short, you fall into what's called revenge trading.
A trading journal can help you learn how to control your emotions while trading to ensure that you only make relevant and accurate decisions. As you analyze your own behavior patterns, you’ll better figure out your personal trading psychology and how to control it.
Improve your risk management strategies
Keeping a trading journal is also a potent tool for learning new risk management strategies. As you keep track of those times when you didn’t assess risk correctly and didn’t make the right decision to avoid losses, you can learn what you did wrong or right.
In other words, tracking it all will help you learn how to adjust your risk levels to a smarter level.
Tips on how to create and keep a trading journal
Journals are only helpful as long as you actually write in them. And, they are as good as what is written in them. So, you need to make sure that you know how to keep a trading journal efficiently.
Here are our tips for writing and maintaining a trading journal that can help you become a better trader.
Begin before the trade and end it after the trade
As you start a new trade, make sure to record every tiny detail about it before you actually start trading and focusing on charts and all that. This way, you will avoid getting lost in all that is happening and forget to write down something that may actually be essential for your result.
» Related: Confirmations Checklist: What to Do Before You Place a Trade
So, begin writing before the trade and end after the trade to make sure that you record every small but critical detail.
Write down everything
When your journal about a trade, make sure to write down everything. Don’t leave anything out, thinking that it is an irrelevant detail.
In fact, make sure to even write down those painful truths that you don’t really like being reminded of. For example, if you were in trade and forgot to exit it because you were too busy scrolling on social media or playing video games, write that down too and explain why this happened.
It will help you prevent a similar situation from happening in the future.
Keep track of your emotions while trading
We’ve already mentioned how emotions can impact your trading decisions. So, it’s essential to keep track of them to understand and learn how to manage them.
When you enter a trade or exit one, when you lose or win, or when you’re unsure what will happen next, pay attention to how you’re feeling and write that down. The sooner you understand your own trading psychology, the sooner you’ll learn how to make unbiased trading moves.
Keep a PDF copy of it
Having a PDF copy of your trading journal is a great way to ensure that you can access all the data you’ve recorded there at any time, whatever device you’re using. Plus, you can also easily share it with your trading peers if you ever need to do that.
PDF format has plenty of advantages, from ease of creation to easy readability, more portable content, password protection, and so on. You can also easily rearrange pdf pages online should you want to edit your trading journal.
Having a PDF copy of your trading journal will allow you to open it on any device and see it in the exact formatting you’ve used on your local computer.
Record strategy ideas whenever you get them
Last but not least, know that you can also use your trading journal even when you’re not in a trade. Whatever relevant information you stumble upon throughout your day, record it in your journal.
For example, if you get new strategy ideas in the morning while having your coffee or while commuting, use the journal to write them down to use them later. Or, maybe you will hear some relevant news that may impact your trades. Again, your trading journal is a great place to record the information you get.
A career as a day trader is rewarding but tough, and every detail can make a difference. Keeping track of everything we do - before, during and after the trade - is among them.
So don't underestimate the importance of keeping a trading journal, and not just consulting it while you're active in the financial markets. That's why it's recommended to always have a copy on Google Drive or saved as a PDF.